What are the types of student loans in India?

According to CRIF High Mark, a credit bureau approved by the Reserve Bank of India, disbursal of education loans increased by 9.25% in the financial year of 2018. This confirms the notion – the cost of education is increasing as the years go by. In such a scenario, students can carry on with their dream.

 

According to CRIF High Mark, a credit bureau approved by the Reserve Bank of India, disbursal of education loans increased by 9.25% in the financial year of 2018. This confirms the notion – the cost of education is increasing as the years go by. In such a scenario, students can carry on with their dream of gaining admission in a reputed institute by gathering information on how to get a student loan.

Financial institutions offer education loans to provide financial support to students who cannot afford the ever-increasing cost of education.
These loans are primarily of two types –

 

1. Unsecured education loan

In case of unsecured education loans, financial institutions do not require students to mortgage or hypothecate collateral. Students can avail this loan with minimal paperwork and achieve fast approval – financial institutions only need the information of their repayment capacity to disburse the loan amount.

Other basic eligibility terms of availing a student loan are –

Nationality

A student applying for an education loan has to be an Indian resident and show his/her KYC documents.

Admission

Those seeking how to get a student loan should also know that financial institutions would disburse the loan amount only if the student secured admission in a recognised institute.

For overseas citizens

Non-Resident Indians and Persons of Indian Origin can also apply for an education loan, but they are required to provide relevant citizenship documents.

Education loans can be classified by the purpose of usage of funds –
Pursue higher education abroad.
Pursue higher education in India.
Course-specific education loans.
Loans for undergraduate programs.
Loans for career-oriented programs.

Unsecured education loans help a student in paying the lump-sum tuition fees of institutions in India and abroad. Financial institutions disburse the loan amount based on the annual income of the applicant’s family.

Under Section 80(E) of the Income Tax Act, 1961, education loans can be utilised to gain income tax benefits.

2. Secured education loan

Parents can secure the finances of their children when they apply for an education loan against property. As a parent, you can avail a substantial amount of loan to fund your child’s education costs by mortgaging a property as collateral.

Moreover, education loans against property do not possess any end-use restriction. In case of a financial crisis during the course period, students can use the funds to deal with the emergency quickly.

Section 80(E) is also applicable in the case of loan against property for education to avail income tax benefits.
Other benefits of availing a student loan against property include –

Substantial loan amount

Parents who are salaried can avail a loan up to Rs.1 crore while those who are self-employed can avail up to Rs.3.5 crore to finance their children’s education. Substantial amounts are considered among the important reasons why a loan against property is a better way to finance your child’s education.

Long repayment tenor

Self-employed individuals can choose a tenor of up to 18 years while salaried borrowers can opt for a period up to 20 years to repay the education loan against property. Using an online EMI calculator is an easy process to determine the ideal tenor of your loan against property.

Minimal documentation

Financial institutions approve your education loan against property with minimal documentation. HFCs like Bajaj Housing Finance Limited offers doorstep facility to verify your relevant documents.

This HFC also provides pre-approved offers that make availing loans quick by removing the hassles from the application process. Check your pre-approved offer by providing your name and mobile number.

When you learn how to get a student loan, you will understand the basic differences between an education loan and an education loan against property. The latter helps you to deal with the travelling costs and other expenses due to the absence of any end-user restrictions.

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